Working Paper: CEPR ID: DP7061
Authors: Pieter A. Gautier; Yves Zenou
Abstract: We show how small initial wealth differences between low skilled black and white workers can generate large differences in their labour-market outcomes. This even occurs in the absence of a taste for discrimination against blacks or exogenous differences in the distance to jobs. Because of the initial wealth difference, blacks cannot afford cars while whites can. Car ownership allows whites to reach more jobs per unit of time and this gives them a better bargaining position. As a result, in equilibrium, blacks end up with both higher unemployment rates and lower wages than whites. Furthermore, it takes more time for blacks to reach their jobs even though they travel less miles. Those predictions are consistent with the data. Better access to capital markets or better public transportation will reduce the differences in labour market outcomes.
Keywords: ethnic minorities; job search; multiple job centres; spatial labour markets; transportation mismatch
JEL Codes: D83; J15; J64; R1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| initial wealth differences (D31) | labor market disparities (J79) |
| wealth gap (D31) | differences in commuting methods (R41) |
| differences in commuting methods (R41) | unemployment rates (J64) |
| differences in commuting methods (R41) | wages (J31) |
| car ownership (R48) | job accessibility (J68) |
| car ownership (R48) | bargaining position in labor market (J52) |
| public transportation reliance (L91) | longer commuting times (R41) |
| improving access to capital markets (O16) | mitigate disparities (I24) |